IT WOULD seem it only takes three letters to create an automotive icon these days - think AMG (Mercedes-Benz), Evo (Mitsubishi Lancer), GT-R (Nissan Skyline), HSV and RUF (Porsche), to name just a few.

Sure there are exceptions, like BMW's "M" cars and Audi's "S" models, but three letters appears to be the cover charge for entering the upper echelons of performance motoring.

In Subaru's case the magic letters are "STi", which stands for Subaru Tecnica International - the company's motorsport and tuning arm. It is also the badge (of honour) that adorns the latest model to come out of the Japanese car-maker's skunkworks, the Impreza WRX STi.

We have seen the STi in Australia before - twice, in fact, during 1999 and both times as a limited edition model. But this time the STi is here to stay. It joins the Subaru range as a permanent fixture, although supply is capped to about 50 cars per month.

Given the stampede that occurred as buyers clamoured to gets their hands on the previous versions, Subaru Australia should not have too much trouble shifting that number of cars (600 per year), particularly as the price has dropped by more than 10 per cent while equipment and refinement levels have improved markedly.

There is also not a lot of direct competition around for Subaru's latest road-going rally-rocket. Sure the starting place for a rival falls at the feet (or wheels) of Mitsubishi's Evolution Lancer, but the Version VI Tommi Makinen Edition model we received in Oz - of which a few still remain unsold - is really a true rival for the last example of the first generation STis.

The current STi's direct rival is the third generation Evo VII model but it is not available Down Under at present and it is still not certain whether it ever will be.

To the amateur observer the STi is little more than a WRX with gold wheels and pink badges, but there is much more to it than that.

The new, second generation car is the result of a complete engineering redesign - not just an upgrade of a standard WRX.

Subaru's engineers have comprehensively strengthened and modified all the key components of the WRX's mechanical package, from the engine and transmission to the suspension and brakes, drawing heavily on the skills and experience gained in the company's World Rally Championship program.

Stronger engine internals and a larger turbocharger, a bigger, thicker gear set, stiffer inverted MacPherson strut suspension and the Brembo-manufactured braking system combine to give the STi serious sports car credentials, as well as a feeling of mechanical solidity you just don't get in a WRX.

A retuning of the ECU (Electronic Control Unit) is the only substantive difference between the STi we get in Australia and the Japanese-spec cars. The ECU has been specifically remapped to enable the car to run on our lower grade 98 RON fuel - Japan uses 100 RON - without any durability concerns.

For that reason the quoted power and torque outputs have dropped from 206kW and 353Nm in the old model (although on Oz-grade fuel they would have been lower than that) to 195kW and 343Nm.

The issue of turbo lag raises its ugly head in the STi as there is less action happening below 3500rpm than we have come to expect from modern turbo engines, especially given the quite linear nature of the standard WRX engine.

But it is by no means as bad as the efforts of the late 1980s and early 1990s, like the Liberty RS Turbo, which had pretty much no zip to offer below about 3000rpm.

This is due in part to the six closely stacked ratios in the new transmission, which is an absolute gem to use. There's a gear for every occasion and it is easy to keep the engine operating in its sweet spot. Anywhere above 4000rpm is where mild turns to wild and this is accompanied by a distinct change in the exhaust note, from road-car burble to hard-edged rally-car growl.

But gear whine from the strengthened transmission can be annoying, particularly on a trailing throttle.

The front "Suretrac" torque-sensing limited-slip differential is a valuable addition to the STi's mechanical arsenal and proves very effective in reducing the on-the-limit understeer characteristic of most four-wheel drive cars.

The trick LSD enables you to push even harder once tyre squeal and front-end push set in, and gives the STi the ability to punch out of corners with awesome speed.

It is when the car's nose begins to run wide exiting a corner that you need to check your instincts because you want to power on, rather than lift off, to make the LSD do its thing and the car tighten its line.

The suspension is firm but not uncomfortably so - you certainly feel all bumps but the car does not rattle or shake and the forces are not transferred through to the cabin. Bodyroll is well controlled and the damping rates are spot on for a car of this nature.

Brake pedal feel on the test car was much harder than we experienced with the STi on the car's launch program and also contributed to a lack of progression. There was also consistent squealing on both cold and light applications of the brakes, which led us to believe the test car may have been dealt some unusual punishment in its short life, rather than anything specifically wrong with the Brembo set-up.

Cabin ergonomics are good and the seating position/steering controls (wheel, pedals, gearshift) relationship is one of the best around, allowing the driver to concentrate on extracting every ounce of performance from the car without hanging off the steering wheel or fumbling for the right gear.

The grippy, well-bolstered seats play an important role here as well, offering plenty of lateral support during cornering and a good dose of natural lumbar roll in the backrest for comfort when behind the wheel for long periods.

But Subaru's decision to go for the extra height adjustment range of the "Super Seat Lifter" is at the expense of the four-way tilt adjustment offered on the previous model.

Apart from the re-trimmed alcantara seats, there are only a couple of subtle differences to the STi's interior to prevent mistaking it for that of a standard WRX.

They include a revised instrument panel with the tacho now dominating the three-dial layout and the addition of a shift light/buzzer to warn of impending redline a different gearshift to go with the new six-speed transmission red stitching on the leather steering wheel, gear knob and handbrake lever a revised minor switch panel that has a button for the intercooler water spray instead of one for the foglights and an upgraded audio system with a six-disc in-dash CD changer (this system was introduced with the MY01 WRX but the MY02 model has reverted to a single CD unit).

On a stretch of bitumen like the Great Ocean Road in Victoria, the STi is right up there as the weapon of choice for an early morning blast. It has plenty of acceleration to burn up the straights, as well as the braking ability to haul you down to a sane cornering speed time and time again, while its outright grip levels and ability to sustain huge lateral G-forces means anywhere there is clear vision there's a passing opportunity - even on the outside of corners.

Of course, a lot of that can be said for the regular WRX as well, but the STi comprehensively raises the bar at all levels and really takes Subaru's Impreza sedan into supercar territory.

Unfortunately, the STi's dynamic abilities do not quite reach the truly high levels set by the Evo Makinen Lancer.

But it is a much more liveable day-to-day proposition and a better car in every other respect - ride quality, fit and finish, equipment, interior accommodation, luggage space and refinement.

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